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Do business angels benefit their investee companies?

Stephanie A. Macht (Newcastle Business School, Northumbria University, Newcastle upon Tyne, UK)
John Robinson (Newcastle Business School, Northumbria University, Newcastle upon Tyne, UK)

International Journal of Entrepreneurial Behavior & Research

ISSN: 1355-2554

Article publication date: 6 March 2009

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Abstract

Purpose

Entrepreneurial businesses often face financial and experiential gaps, which can constrain their growth. Business angels (BAs) can provide sources of financial, human and social capital to overcome these gaps. Building on the work by Munck and Saublens, this paper aims to introduce a framework that seeks to provide a detailed understanding of the benefits that BAs can bring to the firms in which they invest.

Design/methodology/approach

In order to obtain a detailed understanding of the benefits that BAs bring to their investee companies, semi‐structured, in‐depth telephone interviews were conducted from an investee perspective. The key managers of nine angel‐funded companies were purposefully selected and the transcribed interviews analysed with the help of common qualitative analysis techniques.

Findings

According to investee managers, BAs provide benefits in all four areas of the proposed framework. Specifically, BAs: help overcome funding gaps; fill knowledge/experience gaps through provision of their own expertise and involvement; provide a wide range of contacts and leverage further funding, including their own follow‐on finance.

Research limitations/implications

The anonymous nature of the BA market requires convenience sampling, which, in addition to the small sample size used, does not allow for generalisability. The use of telephone interviews instead of face‐to‐face interviews did not allow for observation of non‐verbal cues. Nevertheless, the study identified various areas in need of further research.

Originality/value

In‐depth interview data enabled a detailed exploration of the financial and non‐financial benefits of BA funding from an under‐utilised investee perspective. The paper's main value, however, lies in establishing the usefulness of a framework showing BAs' benefits in a structured manner.

Keywords

Citation

Macht, S.A. and Robinson, J. (2009), "Do business angels benefit their investee companies?", International Journal of Entrepreneurial Behavior & Research, Vol. 15 No. 2, pp. 187-208. https://doi.org/10.1108/13552550910944575

Publisher

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Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited